Future of urban distribution: innovative logistics concepts in zero-emission areas

Mon | 8 Mar 2021 | Simacan Solutions

Future of urban distribution: innovative logistics concepts in zero-emission areas

Today's urban distribution needs to be turned on its head. Transport is currently responsible for a quarter of EU greenhouse gas emissions and this figure continues to rise as demand increases. The European Green Deal strives for reducing these emissions by 90% in 2050. With this, the European Union aims to increase the share of clean vehicles and an innovative European transport sector. Various countries have indicated that they will soon start banning polluting trucks and vans in densely populated areas. This presents logistics service providers, shippers and platforms with some tough choices. What are the challenges and what are possible innovative solutions?

A major challenge for the future is to make city distribution even more efficient and at the same time ensure the quality of life within our cities. The largest goods flows entering the zero-emission areas are FMCG (Fast Moving Consumer Goods) for both B2B (shops) and B2C (home delivery). These goods flows are brought into the urban areas by both vans (90%) and trucks (10%). 

Besides new technologies and alternative fuels, innovative logistics concepts also play a role in the urban distribution of the future. There is no single 'silver bullet' concept as a solution to the distribution problem in cities. Various distribution concepts will be chosen that will ensure that the delivery of all packages and goods (food, furniture, building materials), but also the collection of waste, will go in and out of urban areas in a 'zero-emission' manner.

The different modes of transport within urban areas

If we zoom in on the distribution of FMCG, we see that there are currently different modes of transport within urban areas: 

  • A few small shipments in several areas: this is done by a large part of the trucks and vans that drive into the city. Only a small number of shipments are delivered to an area; then the carrier drives another small shipment to another area; 
  • High density of shipments in the same area: these are mainly parcel distributors, which have such a high density of shipments in vans that they stay in the same area for the entire trip; 
  • Large shipments in zero-emission area: these are trucks that have to deliver larger shipments to shops and supermarkets within an urban area.
Solutions for inter-city transport flows

For all these transport flows, there are various solutions to keep the costs of urban distribution under control, on the one hand, and to meet the zero-emission requirements that cities will be setting, on the other.

Livable city centres and the reduction of emissions require smart urban logistics and zero-emission vehicles. We see the following concepts for the various target groups:

  • High shipment density in zero-emission zones
    For distributors with a high shipment density in a specific zero-emission area, it is quite simple: this high shipment density makes it profitable enough to invest in a fleet running on hydrogen or electricity. Parties choosing this option will have to adjust their pre-trip planning to take into account, for example, battery capacity and/or cargo space: they will have to monitor the operation to keep track of the actual battery consumption. Other processes remain more or less the same;
  • Distributors with (too) low shipment density in zero-emission zones
    Distributors with their own fleet, who have a relatively low shipment density in a specific zero-emission zone, have other options regarding the most suitable concept: own carriers, distribution carriers, network carriers and local entrepreneurs. For them, we see the following options to reduce costs: 
  1. Increasing the shipment density;
  2. Deploying hybrid vans and trucks; 
  3. Sharing delivery capacity with partners/competitors; 
  4. Neutral city distribution hubs;
  5. Using delivery addresses outside the zero-emission zones;
  • Increase shipment density
    In order to keep shipments within a zero-emission area profitable, parties could look for co-players in the same type of transport, delivering within the same area, to the same type of recipients. This may include teaming up with industry peers or competitors. To increase consignment density and to keep investments in special vehicles (hydrogen or electric) profitable, this will have to be analysed and evaluated on an area-by-area basis. In addition, the distributor will have to take into account the transparency of its own data within such a partnership. A cooperation will only be successful if the information between the parties is correct and transparent. This is an important precondition;
  • Deployment of hybrid vehicles 
    For distributors planning for a larger area with one or more zero-emission zones, using hybrid vehicles could be a good alternative. However, the hybrid vehicle must be able to switch to 'zero-emission' driving when approaching a zero-emission zone: something that is currently not so obvious and therefore needs to be monitored.

    In addition, there is still some data to be collected in the pre-trip planning in order to take (part of) zero-emission driving into account. The hybrid truck will have to be monitored during daily operations, and alarms will have to be set off in case reality turns out differently than planned. Also, the proof of emission-free driving will have to be taken into account in case of incorrect fines (due to an empty battery, delays, unavailable charging stations or incorrect public data);
  • Sharing delivery capacity with partners
    Another way to get a higher shipment density is to cooperate intensively with parties who have to deliver similar goods in the respective zero-emission area. To find suitable co-shippers, there are matchmaking tools (such as Compose) that can help in finding other suitable parties. 

    Provinces and sector organisations also sometimes organise network meetings for this purpose. However, in this form of cooperation, there are some data issues to be addressed: distribution plans must be shared and merged and, again, current and correct information about the operation must be shared transparently. In addition, in such a cooperation or community platform you want to be able to indicate with whom you do, but also with whom you definitely do not want to cooperate;
  • Neutral city distribution hubs
    Many attempts have been made to establish neutral urban distribution hubs. So far, however, almost all of them slowly but surely ended. The reason is that they were simply introduced too early due to the lack of a clear market master (the public sector ). Now that more and more cities have a clear emission-free dot on the horizon, the time is ripe for this. These hubs will probably specialise in different types of goods flows that enter or leave the city (e.g. packages, conditioned transport, building materials).

    It is important for these hubs to have an extremely good data infrastructure, but also a good social connection with the city. In terms of data, the inbound, cross-dock and outbound flows must be able to be fully streamlined in accordance with the requirements and agreements that the sender has made with his customer. And here again, planning, monitoring and real-time adjustment are essential to retain customers on the one hand, but also to keep a neutral city distribution hub commercially viable on the other; 
  • Delivery address outside zero-emission zones
    Consignees should be given the option of picking up their goods themselves at a hub, locker or shop outside the zero-emission zone. Or have the choice to have the goods delivered to another address. To encourage this, the cost advantage should be passed on to the buyer as a discount. At the moment, however, the problem remains that many sellers pass on this "free" shipping to the carrier through a unit price per shipment, which means less margin for the carrier. Price differentiation based on dynamic shipment density at delivery address level (hub/lockers/store) could solve this problem; 
  • Shop distribution in cities 
    The larger trucks that supply our supermarkets and shops on a daily basis will have to comply with the zero-emission requirements. However, there are currently (too) few large trucks that can deliver such loads without emissions. The expectation is, however, that they will become available in sufficient numbers in the form of hybrid trucks. The parties are faced with a choice that could be different for each zero-emission area. After all, for a very densely populated area, with a zero-emission zone where the retailer in question has many branches, it could be worthwhile to operate a retail hub yourself. And there too, cooperation with competitors will have to be on the agenda. 
Cooperation in urban distribution 

No matter what turn is taken in solutions for urban distribution, the real-time sharing of data (pre-trip, on-trip and/or post-trip) between private and public parties will always be pre-conditioned for keeping zero-emission profitable: whether it is about traffic lights, the battery status, or dealing with IOT-devices, FMS, etcetera.

Many parties in urban distribution have been working on solutions on various fronts for a long time and assume that the authorities will continue to shape the preconditions, such as standards and agreement systems, in order to prevent the business community from making disinvestments.

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